The Department of Education certified that the state of New Mexico equalizes educational expenditures among school districts. The certification of equalization allowed New Mexico to offset its funding of districts located on Indian Reservations by a proportion of the federal Impact Aid payments made to those districts. Zuni Public School District objected to the certification, arguing that the Department had not followed the statutory formula for determining that a state's expenditures are equalized. Outlier school districts falling above the 95th or below the 5th percentile in per-pupil expenditures were excluded from consideration when the Department determined equalization. The Department calculated these percentiles based on the total student population, but Zuni argued that 20 U.S.C. Section 7709 had repealed that policy.

An administrative judge dismissed Zuni's complaint, and the Secretary of Education affirmed on the ground that the law was ambiguous. A divided panel of the U.S. Circuit Court of Appeals for the Tenth Circuit upheld the Secretary's decision as a valid interpretation of the statute. In a rehearing by the entire Circuit Court, the 12 judges split evenly, again upholding the ruling.

Question

Was the Secretary of Education's regulatory formula for determining whether a state's education funding is equalized among its school districts consistent with 20 U.S.C. Section 7709, the Federal Impact Aid Program?

Yes. The Court voted 5-4 in favor of the Department of Education, affirming the lower court. In his majority opinion, Justice Stephen Breyer agreed with the Secretary of Education's argument that 20 U.S.C. 7709 was ambiguous on the specific formula to be used. Since administrative agencies have wide latitude to interpret their governing statutes, the Court gave deference to the Secretary's formula for calculating the 5th and 95th percentiles for the purpose of determining expenditure equalization. The majority concluded that "[...] the history of the statute strongly supports the Secretary." No member of Congress had expressed an opinion on the formula to be used, so the Department would have been free to calculate the percentiles using either formula. In response to Zuni's statutory-language based argument, the Court ruled that the statute's phrasing could encompass the Secretary's method of calculating excluded districts based on per-pupil expenditure percentiles of the total student population. The four dissenting Justices argued that the statute required the Secretary to calculate the percentiles based on a comparison of the per-pupil expenditures of the districts.

In 1994, Congress enacted the equalization formula under the Impact Aid Act.

It did so clearly and decisively, and described a methodology which was unambiguous, was self contained, reflected a recognized statistical standard, and assisted in actually promulgating... and... the intent of the Impact Aid Act, which is to benefit impacted local educational agencies or school districts and not fund the general educational program of the States.

In so doing, Congress removed from the Secretary the previously delegated authority to establish by regulation the equalization formula.

The Secretary in turn in 1996, in enacting his regulations in response to the 1994 legislation, disavowed that he was engaging in any rulemaking or in fact in any interpretations of statutes.

Instead, the Secretary sought and announced that he was proceeding under an exception to the public notice and comment laws, 5 U.S.C. 553(b), by stating that his regulations merely reflected changes in legislation, refining regulatory language.

Justice Ginsburg: Mr. Van Amberg, they were essentially the same as the prior regulations, were they not?

And those regulations had gone through the notice and comment process.

Mr. VanAmberg: Yes.

That is correct, Justice Ginsburg... Ginsburg.

Those were essentially, except for a few words here and there, those were the same regulations.

But they were in response to a congressional directive back in 1974 that the Secretary is to create the equalization formula.

In 1994, Congress came in with legislation and established that formula.

Justice Ginsburg: I thought that the formula was proposed to Congress by the Department of Education, which is not something that Congress did in other words, to stop the Secretary from whatever he was doing.

But it was indeed... wasn't it the Secretary's own language that Congress enacted?

Mr. VanAmberg: The contention is made that this 545-page omnibus education bill--

Justice Ginsburg: Well, just as to that, the provision that we're talking about, do you say, you say it wasn't drafted by the Department of Education?

Mr. VanAmberg: --I don't think we know exactly who it was drafted by.

I think there is... there is some references in the Congressional... Congressional Record that this is an administration bill.

But I would, I would like to respond, Justice Ginsburg, based on the assumption that this was the Secretary's bill.

Under the statutory formula, the language is clear that what is disregarded in... in ranking LEAs and eliminating percentiles of LEAs is those LEAs which fall above the 95th percentile--

Justice Scalia: Before you get into the substance let's... let's finish with this, this problem, whether it was indeed the other Secretary's own bill.

Was the Secretary who proposed the... the '94 legislation, the same Secretary who had promulgated the prior regulations?

Mr. VanAmberg: --No.

This--

Justice Scalia: The prior regulations were promulgated when?

Mr. VanAmberg: --The former regulations were promulgated in 1976.

Justice Scalia: My goodness, that's a long time before.

Mr. VanAmberg: That's a long time.

Justice Scalia: With a different Secretary now.

Mr. VanAmberg: And a different agency.

There wasn't even--

Justice Scalia: So there's no reason to believe that the same Secretary... that the Secretary continued to have the same view of what was proper, is there?

Mr. VanAmberg: --We view that it did not and, and also, Justice Scalia and Justice Ginsburg, we also view that if this was the chief educational officer of the Federal Government, he was more than capable of developing a statute which reflected his methodology of--

Justice Scalia: Indeed he could have copied the regulations that were on the book and just put them in the statute, couldn't he?

Mr. VanAmberg: --Well, even in the same act, Your Honor, under when they had the EFIG statute, there Congress was able to reference the regulations of the Secretary.

They didn't do so when they were, when they enacted the impact aid part of it.

So--

Justice Ginsburg: Well, as... as far as the difference in time, it was the Secretary's decision, the later Secretary's decision to retain, as you acknowledged, the, almost the identical regulation.

You said it didn't go through notice and comment the second time, but the text was basically the same in '76 and in--

Mr. VanAmberg: --He didn't... if I could, Your Honor, he did not retain the second regulation.

This was supposed to be a new regulation which was promulgated by the Secretary because the Impact Aid Act had been repealed--

Justice Ginsburg: --Yes--

Mr. VanAmberg: --and re-enacted.

Justice Ginsburg: --and I appreciate that.

But the text of it, what the regulation said was not significantly different from what the earlier regulation said.

Mr. VanAmberg: No.

But it--

Justice Scalia: Was this the same Secretary, by the way, as the Secretary who issued the new regulation, the same Secretary that was in office when the new legislation had been proposed?

Mr. VanAmberg: --The new legislation was '94.

Secretary enacted it in '96.

I think it probably was.

I... I... it was the same administration.

Justice Scalia: Why, why would the--

Secretary, if indeed it was his bill, why would he deprive himself of the power to decide what the formula should be?

Which is the power he had before.

I mean, one must think that there must have been some pressures from elsewhere when the Secretary goes in and says take some power away from me, please.

Mr. VanAmberg: Well, that, and I would agree, Justice Scalia, that that is not a, a usual event where an administration intentionally disgorges from itself its own authority.

And, and I would also point out the fact that again, there is a dramatic difference between what, what the statute proposed and, and the methodology described in the regulation.

And what's, what's very significant is if you go back to 1976 when the original regulation was promulgated, there was a debate that went on in the public notice and comment portion of these proceedings where they discussed whether you eliminate percentile of LEAs directly or whether you add this extra step of eliminating percentage, percentages of pupils and then eliminating LEAs as these pupils are eliminated.

I mean, it's a totally different process, totally different philosophy behind them and as we can see in this particular case, in New Mexico and in Alaska, totally different results.

Justice Alito: Well, Mr. Van Amberg, is the statutory language really as unambiguous as you suggest?

It says above the 95th percentile or below the 5th percentile, but it doesn't say above the 95th percentile of local education agencies or below the 5th percentile of local education agencies, does it?

Mr. VanAmberg: Well, Justice Alito, I, I think what you, I think it is clear and unambiguous.

And the reason is that if you, in order to run a percentile calculation you need units against which to run that, and then you need these, an identified set of variable standards such as they provided here, the average per pupil expenditures of each set of these LEAs or districts.

So you rank the, the LEAs.

You've got the variable values and then it, it's, the statute provides that you find that you eliminate those LEAs which are above the 95th percentile.

And then if you go back to what 95th percentile of the revenues and expenditures of the LEAs in the State.

It's a very similar process for--

Justice Breyer: Yes, but what do you distribute?

Mr. VanAmberg: --Pardon?

Justice Breyer: What do you distribute?

I mean, I agree you have a, some kind of, let's put something on cards, so you have thousands of cards and each one has a number on it.

What are you distributing... the cards?

Are you, are you... what's distribute... a 5th percentile refers to some kind of distribution.

What's it a distribution of?

Mr. VanAmberg: It's the distribution of the percent of the, what is--

Justice Breyer: Is it a thing?

Mr. VanAmberg: --Like a thing.

Justice Breyer: Like a... like a set of things that you're distributing, what are they?

Mr. VanAmberg: The thing that you're running the percentile against is the total number of, of expenditures and revenues in the State.

Justice Breyer: In other words, you take all the... there is a set of numbers, each number is a different number and the characteristic of each number is there some school district that spends per, or takes in per pupil, revenue equal to that number.

So we write each one on a card.

Is that what we're, is that our distribution?

We have like, let's say we have a, a thousand cards.

Is that what it is?

Mr. VanAmberg: Well, you know, in New Mexico's case you have--

Justice Breyer: No.

No.

I'm not, I'm saying what do you think it has to be?

What do you think it should be?

What are, what is it we are distributing?

A simple question, I guess, for a statistician.

I unfortunately am not one and can't find one, so I have no idea what this statute means.

[Laughter]

Mr. VanAmberg: --Well, the, the... the value against which--

Justice Breyer: Not a value.

I want to know what I'm distributing.

And if you don't know I would say that this is, I have never seen a case so much better fitted for relying on the views of an agency.

Justice Scalia: Counsel, I thought you said that you did know what it was.

I thought you simply quoted the statute, the 5th percentile of such expenditures or revenues in the State.

That's what's being distributed.

Mr. VanAmberg: --Yes, but--

Justice Breyer: I'm sorry, I don't know how--

Justice Scalia: Such revenues or expenditures in the State consist of, the word "such" obviously refers you back to some prior reference to revenues in the State, and that prior reference in subsection A is a reference to district by district, not pupil by pupil.

Mr. VanAmberg: --That, that's correct.

Justice Breyer: --So, so in other words we are distributing those cards, it's a set of numbers?

If you're certain, isn't it fair to say that this statute is not clear as to what it is you're distributing?

Chief Justice Roberts: You're not certain about the hypothetical but you're certain about the statute, aren't you?

Mr. VanAmberg: I'm certain about the statute.

You're provided the variable values that are attributed to each of the LEAs; you rank them; and you provide a percentile.

It's a methodology which was described in 1976.

It's a methodology employed every day in ranking students and schools.

Justice Breyer: --Yeah... that... right.

But I unfortunately don't know enough about this subject, so I thought, not being an expert on it, that when you referred to a percentile, you have some group of things, a set of things that's being distributed in a certain order and there is a top of that and a bottom of that.

Mr. VanAmberg: Correct.

Justice Breyer: And if that's what percentile refers to, I just want to know what those things are that are being distributed.

And... and that's where I find the ambiguity.

And if there is an ambiguity, I guess we are going to take the view of the agency at least as I understand it.

So... so that's why I asked the question.

Mr. VanAmberg: All right.

And, and I think I understand the question now, Justice Breyer.

Thank you.

The units that are ranked or distributed are the LEAs or the school districts.

And they are ranked in order of their per pupil expenditures and revenues.

Those are the units and the component parts of this calculation that are provided for us by Congress.

Justice Breyer: And does the statute say you have to do it that way?

It has to be the group that's distributed?

Mr. VanAmberg: It's my understanding under... under Brown and Williamson is if Congress speaks to an issue, Congress is to be obeyed.

Justice Breyer: Clearly.

Mr. VanAmberg: There is nothing mysterious about this type of a methodology.

And this is the one that Congress chose.

Justice Breyer: No, you could do it that way and the reason the Government, I think, says that you shouldn't do it that way is that it would produce an absurd result.

Mr. VanAmberg: All right.

Justice Breyer: That the object of the statute is to catch the outliers.

And if you, for example, had one giant school district like New York City which was at the top of the list and another giant school district that was at the bottom of the list you would cut those two out, and you might have cut out half the pupils in the whole State, and those wouldn't be outliers would they?

I mean, that's the problem.

Mr. VanAmberg: And you have a similar infirmity associated with the other methodology.

That is, if you have a number of LEAs which are small in numbers, as in New Mexico, particularly if you had a number of small LEAs at the bottom, which is I think a huge problem policy wise, you were to cut them out and let them to float off in their poverty.

I was surprised there wasn't more discussion of that in the briefing and maybe it's, it's because of some reason I'm unaware of.

That says that the Secretary in making this determination can take into account particular types of LEAs where there is extra, additional costs.

I would have thought for example if you had a very small LEA with only 20 students and the cost is particularly high because you don't have economies of scale, that you haven't... that would, could be knocked out for that reason.

Is that not how that works?

Mr. VanAmberg: --Yes.

And this is the, the whole problem, that we can argue philosophically how whether Congress's methodology or the Secretary's methodology is better, but the backdrop of this is that the, the statute and also the regulation allows for school, for the States to back out all these disequalizing expenditures so that you, you make an adjustment to more or less end up with a baseline per pupil expenditure.

And there is really no reason after you do that for having a wide disparity, even between the top and the bottom LEA.

The Secretary's formula, and I don't think we should be arguing whose formula is better, because if they are different, Congress wins, but nevertheless, the Secretary's formula, it eliminates 26 percent of the school districts.

And under New Mexico, if you, if you look at the top and the bottom school district even after the eliminating of these funding differentials, you've got a 244 percent disparity.

Justice Breyer: It, it eliminates 26 school districts but those 26 school districts account for 5 percent or 10 percent of the pupils.

And I guess what we are interested in here is not school districts; they are not a thing... they are a thing of a kind, but we are interested in students, real people who get money.

And so that it, that it... it eliminates 26 percent of the school districts would see, to be a good thing, not a bad thing, because what we are really interested in are the pupils and it keeps in 90 percent of the pupils.

Mr. VanAmberg: And Justice Breyer, I think Congress and in its methodology has disagreed with that view, because it does not rely strictly upon pupils, and pupils are not necessarily the driving force in how we work this formula.

Justice Scalia: I thought the problem was disparity in school districts.

Since much of the funding for education is local funding, in some places there are very rich school districts and very, very poor, poor school districts.

And I thought that the purpose of this was to make sure that there is not an enormous disparity, not pupil to pupil but district to district.

It makes perfect sense, it seems to me.

Mr. VanAmberg: And that is correct.

Because these districts particularly in New Mexico serve a unique purpose.

New Mexico has pockets of, of urban and populations, and then they have got small traditional villages; they have got farming communities; they have got Indian lands; they have got military bases.

And a school district whether it educates 100 children or 1,000 children or 5,000 children has a special value in the State and in our educational process.

And simply because a child in New Mexico attends the school district that does not have particularly many students in it doesn't mean that he has to suffer a poorer education than his brethren and brothers and sisters in the metropolitan area.

Justice Ginsburg: Mr. Van Amberg, if there is any ambiguity in the statute, one relevant consideration might be how would this work across States, and I think it's true, is it not, that your reading would lead to wildly different, wildly different results from State to State depending on whether they have large districts or small districts at the top and the bottom, whereas the other way, counting pupils rather than school districts regardless of size, you would get uniformity going from State to State.

Mr. VanAmberg: Justice Ginsburg, the Secretary recognized in 1976 that both methodologies have their problems, depending on how your districts, the number of districts that you have in a State, their relative populations, how they line up.

And--

Justice Stevens: Am I correct in understanding that at the end of the line here, if you win the Federal money will go to your two districts, whereas if the other side wins the Federal money will go to the State?

Is that what the bottom line is?

Mr. VanAmberg: --That's the bottom line.

Justice Stevens: Yes.

Mr. VanAmberg: And I would point out, Justice Stevens, that Congress has made it clear that the impact aid is supposed to go to the impacted districts.

It is not supposed to fund the general educational program of a State.

The money that the State, that the State of New Mexico seeks to retain is under a limited exception that has been created and it is, it is not that we are trying to take the State's money as the bottom line.

It is that the State has taken the impact aid dollars and doesn't have an equalized system.

New Mexico could equalize if it wants to.

It established its equalization formula.

Justice Stevens: Let me ask another general question.

If it were true, and I don't think it is in this case, that the biggest district was the one that got the most per pupil money... the two biggest districts that were at the opposite ends of the spectrum, they would all be taken out, wouldn't they, under your view?

Mr. VanAmberg: Well, it actually depends... you get into statistical approaches, but if, let's say, there were less than 20 districts, you just had let's say 18 districts or 19 districts, then if you do the percentile against, if you work the percentile in that particular setting, nobody gets eliminated.

Justice Kennedy: But you have the same problem if it's students, I take it?

You'd have the same statistical question whether you, you use districts or students?

Mr. VanAmberg: Correct, because you would run... because if you had districts, big districts at both ends, you run your 5 percent on both ends with the students, you end up not eliminating anybody.

Justice Breyer: That's all right.

I wouldn't think that was a problem.

But what about Justice Stevens' question.

There are 20 districts in our State... it's exaggerated, let me exaggerate it... and the rich district has 20, has a quarter of the students, and the poor district has another quarter.

So our outliers in that situation which we're eliminating from our calculation are the rich district and the poor district.

One's at the top, one's at the bottom.

And now we're left with 18 districts to figure out whether they're equalized.

But those 18 districts account for less than half or about half of all the students.

That's the problem.

It seems that isn't very representative and we're trying to get representativeness.

Mr. VanAmberg: Well, Justice Breyer, I, I would respectfully like to go back, not to what we are trying to accomplish through judicial decision, but what Congress accomplished through its decision.

Justice Breyer: I understand that.

If the language doesn't permit it you can't do it, they can't, and you win.

But if the language does permit it, the reason... you have to stretch the language, I suspect, in my view to get to the Government's result.

It might just barely permit it.

But one of the things on their side is that if we take your view it produces an absurd result, because of what Justice Ginsburg said, because there is such variation in the number of pupils among school districts in different states.

Mr. VanAmberg: Right.

If I could address that, Your Honor.

The only argument I see the State has is the argument about absurdity.

This debate that we're having now is the debate that took place in 1976 in front of the Secretary.

He recognized that there were two methodologies that he was considering.

He recognized that they both had their problems.

But in 1994, Congress had before it at least or had available to it information as to the, whether, what, how this particular formula would work.

There were only three and perhaps... three States, Kansas, Alaska, New Mexico, and perhaps Arizona... that had... that were trying to take advantage of the, of this narrow exception.

So they knew the configuration and the composition of these school districts.

And so they could look if they wanted to... and there's no legislative history to this, but they could have looked if they had wanted to, to exactly what the practical effect would be of these two formulas.

And the practical effect is that in New Mexico the formula which the Respondents contend is absurd reduced only 11 percent of the LEAs.

And with the backdrop that this, that these LEAs should have been more or less equalized anyhow because of removing the disparate funding, that's, that's much more reasonable and certainly doesn't reflect an absurdity, and when you compare that to the Secretary's approach which eliminates 26 percent and cuts loose 23 school districts out of 89 from any consideration and you end up with kind of a core block in their 14 or 15 percent disparity, I think there may be those who could argue forcefully that that's an absurdity.

Justice Kennedy: I see your white light is on.

I don't want to take... would the other States make that same answer that you just made?

Mr. VanAmberg: Kansas equalizes under any formula, as New Mexico did, could do.

Alaska, you eliminate 22 percent in order for them to just kind of squeak by.

If they applied Congress's formula they would just equalize.

This is an option I contend that's available to every State that wants to take advantage.

If you give them a 25 percent disparity allowance, you allow them to back out disequalizing expenditures.

There's really no explanation that's been offered why there's any disequalization at all.

With that, if there is any time... unless there are any further questions.

Argument of Sri Srinivasan

Chief Justice Roberts: Thank you, counsel.

Mr. Srinivasan.

Mr. Srinivasan: Thank you, Mr. Chief Justice, and may it please the Court:

Justice Scalia: Mr. Srinivasan, you don't want us to stretch the language, do you?

The question, the question before the Court is whether the Secretary's formula is unambiguously foreclosed by the statutory test, not whether it's the better reading, but whether it's unambiguously foreclosed.

And we happen to think it's the better reading, but we certainly think it's not unambiguously foreclosed.

And maybe the clearest indication that Congress did not unambiguously foreclose the Secretary's methodology--

Mr. Srinivasan: --Well, Brand X says that, but it's a characterization of the step one inquiry under Chevron.

And we can use "foreclosed" if you like, Your Honor.

But the clearest indication that the statute does not foreclose the Secretary's methodology is a provision that I think hasn't been addressed thus far in the argument and that's that in the very same act in Congress in which Congress enacted Section 7709, the provision at issue here, Congress also explicitly endorsed and incorporated the Secretary's--

Chief Justice Roberts: You begin with an argument that directly cuts against your position.

They knew how to do it under the... I assume you're referring to the education finance and incentive grant program?

Mr. Srinivasan: --I am.

Chief Justice Roberts: Well, they did it there, they didn't do it here.

To me that suggests the opposite of the inference you're trying to draw.

Mr. Srinivasan: I don't think so, Mr. Chief Justice, with respect.

There are two education finance incentive grant program, or EFIG, provisions that we identified in the briefs and one of them I would acknowledge is susceptible to that line of argument, although I don't think it's persuasive.

But it's the other one that I'm focusing on, and what the other one does is to explicitly incorporate the Secretary's regulations and so what Congress said in 1994 is that for purposes--

Chief Justice Roberts: Which they did not say in this act.

Mr. Srinivasan: --They didn't, but I think it would be very odd to attribute to Congress the intention on one hand to say, we like your regulation, so much so that we want to use it and we want you to continue to use it for purposes of the EFIG program--

Justice Scalia: Different purposes.

Mr. Srinivasan: --They're not--

Justice Scalia: They're for different purposes.

Mr. Srinivasan: --They're not different purposes at all, Justice Scalia, with respect.

They're the exact same purpose.

In both programs what Congress wanted to do was to get an assessment of the extent to which education expenditures were equalized in a State among school districts.

They're the very same purpose.

Chief Justice Roberts: But for different purposes.

In the one case, in this act we're worried about an extensive Federal presence that has an effect on the tax base available for schools and under the EFIG program it's an entirely different question of equalization.

Mr. Srinivasan: Well, at that level of generality you might be right, but with respect to the purpose of the equalization provisions of both of those acts the purpose is exactly the same.

In impact aid, just like in EFIG, the question is to what extent has the State equalized expenditures across school districts.

It's the very same question.

Chief Justice Roberts: Well, maybe let me ask it directly.

If they could so easily just say we incorporate the Secretary's regulation in EFIG, why didn't they do it here?

Mr. Srinivasan: Well, because--

Chief Justice Roberts: They instead went to the trouble of mimicking part of the regulation, but not mimicking the appendix, which is where your calculation methodology is.

Mr. Srinivasan: --Well, they didn't mimic it.

They incorporated it.

And so far as the argument is that they incorporated just the regulation qua regulation and not the appendix to the regulation, I don't think that that argument can be squared with the statutory text or the regulatory text.

Chief Justice Roberts: Can I ask, is there a difference legally between a regulation and an appendix to the regulation?

Mr. Srinivasan: I don't think so, at least not in the circumstance of this case, where the regulation by its own terms incorporates the appendix.

And so when Congress incorporated the regulation it necessarily incorporated the appendix.

Chief Justice Roberts: But you say "incorporated", though.

What it did was it took the language and it did not take--

Mr. Srinivasan: No.

Chief Justice Roberts: --No?

Mr. Srinivasan: No, I don't think so, Your Honor.

The text of the statute in 1994 is set forth at the top of page 30 of the Government's brief, and I'm quoting from the second line of page 30 and what Congress said in the EFIG statute in 1994, again in the very same act that enacted this language--

Chief Justice Roberts: In the EFIG statute?

Mr. Srinivasan: --In the EFIG statute.

Chief Justice Roberts: But in this statute the regulation says look to the, look at the appendix.

Congress as I understood when it enacted our statute, it took language from the regulation; it didn't take the part that said look to the appendix.

Mr. Srinivasan: Well, it didn't take the part that said look to the appendix because I don't know that that would have been a sensible thing to do when you're enacting a statute.

But the point I'm trying to make is that when Congress in the EFIG statute incorporated the regulation it specifically referred to the regulation that the Secretary had in place at that time.

Chief Justice Roberts: And it didn't do that here?

Mr. Srinivasan: It didn't do that here, but it didn't have to.

It makes sense--

Justice Scalia: I still think it cuts against you rather than for you, the fact that they could have done the same thing here and we wouldn't have this case.

Mr. Srinivasan: --Well, let me just make one more point on this, Your Honor, and then I'll move to the text of Section 7709, because I do think that this point has a great deal of force.

The reason that Congress would have incorporated the regulation specifically in EFIG but not in impact aid is because we're dealing with an impact aid regulation.

So the Secretary ordinarily wouldn't have thought that he should apply the impact aid regulation for purposes of EFIG unless Congress told him to do that and that's what Congress did.

But with respect to impact aid, there's no reason to incorporate the regulation.

The regulation already existed, and the question is did Congress in this act foreclose the Secretary from continuing to apply that longstanding regulatory methodology.

And I would suggest that if Congress really wanted to--

Justice Scalia: Mr. Srinivasan, if we could come to the, to the text that you're talking about.

Mr. Srinivasan: --Sure.

Justice Scalia: What I don't understand about the Government's position is why you use this, this per pupil theory for purposes of (B), but don't use it for purposes of (A).

You, you don't... in the major computation portions, namely for purposes of paragraph 1, a program of State aid equalizes expenditures among local expenditures, if in the second fiscal year is made the amount of per pupil expenditures made by or per pupil revenue available to, you do it agency by agency, don't you?

You DON'T apply this, you know, it depends on how many pupils in each agency.

Why don't you do for both?

Mr. Srinivasan: Well, if you look at 2(a), Your Honor what that says is that the disparity, the disparity standard at its broadest level deals with whether the per-pupil revenues for the highest ranked local educational agency exceeds the per pupil revenues for the lowest one by 25 percent.

Justice Scalia: Right.

Mr. Srinivasan: It would make no difference if you take into account pupils for that part of the analysis, and here's the reason why.

When you take into account pupils with respect to a local educational agency and you weight the local, the figure by the number of pupils served by the local educational agency, the per pupil figure that you're going to attach to each of those individual pupils is the same.

It's the same per pupil figure for each one.

It's just that you multiply it by the number of pupils.

So for purposes of this part of the statute, where you're comparing the highest to the lowest, whether you took into account the number of pupils or not you'd still be dealing with the same two figures.

You'd be dealing with a figure that applies to the highest ranked local educational agency and you'd be dealing with a figure that applies to the lowest ranked local educational agency.

Justice Scalia: You're saying it comes to the same, but the fact remains you don't use that methodology in A, because you don't think the language requires that methodology.

And it is the same language in B.

Mr. Srinivasan: No, there would be... I don't know that we use one or the other.

It's just that there would be absolutely no purpose served by using pupils with respect to--

Justice Scalia: Well, the purpose would be to follow the language of the statute, and if you think that the language in B requires this kind of an approach you should take the same approach in A, especially if it makes no difference.

Mr. Srinivasan: --Well, no; especially because it makes no difference, because with respect to the B part of it, the 95th and 5th percentile exclusions, it makes all the difference in the world whether you take into account--

Chief Justice Roberts: I have a conceptual difficulty, and it may be my limitations with the way you do it.

You take students and you assign a per-pupil number to each individual student.

Mr. Srinivasan: --Effectively.

Chief Justice Roberts: But I would have thought the per-pupil concept only makes sense if you're dealing with LEAs.

They have a per-pupil number because they've got a bunch of pupils.

You take individual students, and you know for example in that school district you don't spend the same amount of money on the kindergartner that you spend on the eighth grader.

And yet, you give the kindergartner a per-pupil number and the eighth grader a per-pupil number that is the same.

It's an artificial association.

It makes sense to speak of per-pupil numbers when you're referring to the LEAs because they have so many pupils, they get so much money, you can do the calculation.

It doesn't make sense to say, you know, John Smith the kindergartner has a per-pupil expenditure of a thousand dollars.

He may have $200 and the eighth grader 2,000, so why are you creating this artificial association and then using, using that methodology?

Mr. Srinivasan: Well, it's an approximation to be sure, and per-pupil revenues by definition deal with approximations across the swath of students that are covered by local educational agencies.

Chief Justice Roberts: And it's only... the reason is to rank them if you have an entity that has a swath of students, the district, that's the way it should be ranked.

When you're ranking it by pupils, maybe if you ranked them by pupils and you have the actual numbers of course, which nobody does, your methodology would make sense.

Mr. Srinivasan: Well, I think what we're really doing, Your Honor, is weighting each figure by the amount of pupils in the school district, and the reason we're doing that is to get a more accurate picture of the extent to which any one school district's per-pupil revenue figure contributes to the overall revenue pictures in the State.

And if I could use one example which I think might help to crystallize why it's necessary to do this sort of weighting and why education finance practitioners routinely prescribe that you have to do this sort of weighting in order to avoid distorted results, if you consider the example of a State that has two school districts, and I'll use real examples from New Mexico.

One would be the district that has the highest per-pupil revenues in the state, the Mosquero district, in which there's 57 pupils.

And the other would be the Albuquerque school district, the largest school district in the State, which serves 84,000 pupils.

Now the per-pupil revenues for Albuquerque are roughly $3,000 and the per-pupil revenues for Mosquero, the smaller school district, are roughly $7,000.

And if you imagine a State that consists of just those two districts, and you ask the question to pair with the statutory language, what is the 50th percentile, and I'll use 50th just for ease of analysis, what is the 50th percentile of such per-pupil revenues in the State?

One answer would be that you take the number for Mosquero, the 7,000 and you take the number for Albuquerque, the 3,000, you split the difference and you say the 50th percentile of per-pupil revenues in the State is $5,000.

But I think that would present a very misleading picture of what's actually going on in the State.

Chief Justice Roberts: No--

Mr. Srinivasan: Because--

Chief Justice Roberts: --Well, because it's an absurd hypothetical.

What is the--

Mr. Srinivasan: --I don't... I... it is not--

Chief Justice Roberts: --What is the smallest number of districts, what is the smallest number of school districts in a State?

Mr. Srinivasan: --One.

Chief Justice Roberts: Which State has one school district?

Mr. Srinivasan: Hawaii.

Hawaii has one which is a special case but there are states that have a relatively small number of school districts.

Chief Justice Roberts: In the, in the hypothetical you posed why couldn't the Secretary address that disparity under (b)(ii)?

In other words, the school district which has only 57 students, it seems to me could be taken out of the calculation under (b)(ii), and then you would be dealing only with more representative school districts, not the special case of the particularly isolated school district or whatever.

Mr. Srinivasan: Two points on (b)(ii), Mr. Chief Justice.

The first is that by... by the statutory text, (b)(ii) is over and above what you do in (b)(i, ).

The 95th and 5th percentiles exclusions.

So you first have to do that.

But the more relevant point--

Chief Justice Roberts: Why do you have to do that?

Why do you have to do it first?

It says you can take into account this... extent to which the program reflects additional costs in particular districts.

Mr. Srinivasan: --No, my point is simply that under (b)(i) the statute says the Secretary shall disregard local education agencies that are above the 95th and below the 5th percentile.

So I think the Secretary has to do that.

Now (b)(ii) in some sense could be seen as an additional option for the Secretary over and above the exclusion, but there is a more fundamental point which is that with (b)(ii), it says take into account the extent to which a program of State aid reflects the additional costs.

And so what that does is a piggyback on the way that the State approaches the situation.

So this, as... this provision as the Secretary understands it allows it to give effect to a State that gives effect to those sorts of considerations, but it's not an independent grant of authority for the Secretary himself to take those considerations into account.

Justice Souter: Mr. Srinivasan, you... you may have convinced me.

I'll stipulate that you have convinced me that the argument that you're arguing for would probably be a better method, but you haven't touched the text of (b)(2)(b)(i) yet, and that's where some of us at least are, are having our... our problems.

Do you agree that in the absence of the other program, I forget the, the acronym for it... that you really would not have any argument that there is ambiguity in the text here?

Mr. Srinivasan: No.

No.

Absolutely not.

Justice Souter: Then... then would you address the text?

Mr. Srinivasan: Sure, I will.

It's at page 4a of the appendix of the Government's brief, b... (b)(i).

And what the text says is disregard local educational agencies with per-pupil expenditures or revenues above the 59th percentile or below the 5th percentile of such expenditures or revenues in the State.

Justice Souter: Okay.

Mr. Srinivasan: Now one point I make--

Justice Souter: So what is supposed to be disregarded are educational agencies?

Mr. Srinivasan: --Yes.

Justice Souter: Right.

And the agencies are identified how?

How do we identify the agencies that would be disregarded?

Mr. Srinivasan: You identify the agencies to be disregarded by first identifying the 59th and 5th percentiles of per-pupil revenues in the State.

Agencies with per-pupil expenditures or revenues above or below, right?

Mr. Srinivasan: --Yes, but... and... but the critical test is the 95th percentile and 5th percentile of such expenditures or revenues in the State.

Justice Souter: But that critical test is being applied to an agency which is being identified by reference to per-pupil expenditures or revenues, correct?

Mr. Srinivasan: It is.

I mean there is no doubt that the per-pupil revenues or expenditure figures that lie on the spectrum are associated with the local educational agencies.

That's how--

Justice Souter: Well, it's not merely that they are associated with.

The very definition, the very identification of LEA here is exclusively in terms of per-pupil expenditures or revenues.

It's not merely in association.

It is a definition, isn't that so?

Mr. Srinivasan: --I don't think so.

The--

Justice Souter: Then, then what does the phrase with per-pupil expenditures or revenues above 95 or below 5 mean?

Mr. Srinivasan: --Well, that's true that each local education agency has a per-pupil expenditure or revenue.

But the critical part of the statute which has 59th percentile or 5th percentile of such expenditures or revenues doesn't foreclose weighting.

And I think the point that Justice Alito made bears, which is--

Justice Souter: Well, why doesn't it?

It seems to me that the only identification of an entity or person, if you want, to be disregarded is the identification of an LEA, and the LEA is described in terms exclusively of its expenditures or revenues.

First the Secretary's formulation, no less than Petitioner's formulation, does disregard local educational agencies with per-pupil revenues above the 95th and 5th percentiles.

Justice Souter: Right.

Obviously--

Mr. Srinivasan: Where we disagree is in identifying the 95th exactly.

Justice Souter: --After identifying them in terms of the expenditures or revenues.

That's what you're supposed to do.

Mr. Srinivasan: Exactly.

And I'd... exactly.

And I'd reiterate the point that Justice Alito made earlier, which is that Congress could have compelled the approach that Petitioners compelled... contend, if it would have said--

Justice Souter: There are lots of things that Congress could have done differently from what it did do, but it, that doesn't seem to me to inject an ambiguity in the identification in, in this subsection of the LEA that we are talking about.

And it doesn't create an ambiguity in, in the clear provision that what is to be disregarded is an LEA as so defined.

Mr. Srinivasan: --Well, I think it does, Your Honor, because there are two different ways of ranking the LEAs.

One is to take the per-pupil revenues associated with each LEA and simply take that list into account.

Another is to take the same list but then weight it by the number of pupils in each LEA.

Justice Souter: Sure, that's another way to--

Mr. Srinivasan: Nothing in the statute forecloses that approach.

Justice Souter: --do it, but tell me why that is consistent with the text.

Mr. Srinivasan: Because the text refers to the 95th and 5th percentiles of such expenditures or revenues in the State, and the list that includes the weighting does represent a list of expenditures or revenues in the State.

Justice Scalia: Would such be... of such expenditures or revenues.

That refers back to local educational agencies with per-pupil expenditures or revenues.

It's referring you back not to the totality of students but to, to agencies with per-pupil expenditures or revenues.

Mr. Srinivasan: Sure.

And I don't, I don't dispute that the per-pupil revenue figures belong to a local educational agency.

But again that doesn't mean that you can't take into account the relative extent to which a particular school district contributes to the overall State picture, and the way you do that--

Chief Justice Roberts: Wouldn't the statute have told you, though, to, to disregard pupils according to the ranking?

It does tell you to disregard LEAs, which suggests the ranking... at least to me, that the ranking ought to be of LEAs and not pupils.

Mr. Srinivasan: --Well, it is, it is a ranking of LEAs in the first instance and then it's, each of those LEA figures is weighted by the number of pupils the way we do it, and we do end up disregarding LEAs.

But as Justice Souter pointed out the first step is identifying the 5th and 95th percentiles, and on that step we take into account the number of pupils.

It's only at that step that we take into account the number of pupils.

Justice Stevens: May I ask--

Mr. Srinivasan: And nothing in the statute forecloses that.

I'm sorry.

Justice Stevens: --a rather basic question?

What if I'm convinced that your opponent's reading is really only the fair reading of the statute, but I'm also convinced by you that that's not what Congress intended.

What should I do?

[Laughter]

Mr. Srinivasan: Well, one way or another I think your should rule in our favor.

[Laughter]

Justice Stevens: Well no.

Accept, accept my premises.

What do you think I should do?

Mr. Srinivasan: Well, I think in that situation you sort of have the sliding scale that we often confront with textual analysis.

And if you really think that Congress would have compelled an absurd result, and I think it does verge on that, then you would--

Justice Stevens: I don't think it has to be absurd, it's just, I would measure it by what Congress actually intended.

Assume there two permissible readings, and two... both of them make sense.

And I'm convinced, assume I'm convinced by you, that they really intended to perpetuate the prior method of procedure.

May I take that, may I come to that result even though I think the language really says exactly what your opponent says it says?

Mr. Srinivasan: --Well, if the language absolutely unambiguously compels that reading, then I think it would be a difficult position.

But I don't think it goes, goes to that degree.

Chief Justice Roberts: I would have thought your office had answered that question in countless briefs where it tells us to be guided by the language of the statute and not some unexpressed intent.

Mr. Srinivasan: Well, that's why I said, if you think that the statute unambiguously actually compels that reading, then I don't know that we would have a position.

Justice Scalia: Well, you still have a Church of the Holy Trinity team over there somewhere, don't you?

[Laughter]

Justice Breyer: Why doesn't it... why doesn't absolutely compel it?

Where is the ambiguity, you say?

Mr. Srinivasan: It says--

Justice Breyer: --the 5th percentile of such per-pupil expenditure.

And that--

Mr. Srinivasan: --That's right.

Justice Breyer: --Now how are you going to get that so it doesn't just say just list cards with per-pupil expenditure on it, different ones and take the top five?

Mr. Srinivasan: Well, well it's just the number of cards, ultimately, under your hypothetical, Justice Breyer.

Justice Breyer: Do you have a lot of cards that have the same cards that have the same number?

You have a lot--

Mr. Srinivasan: They have the same cards, we just have... they have the numbers, exactly.

Justice Breyer: --Yeah.

Mr. Srinivasan: It's the same cards with the same numbers.

We just add more cards in order to reflect the extent to which each LEA contributes to the overall picture.

Justice Breyer: And why, why don't you take the top five where we have 10 percent of the students, let's take the second five and they happens to have the same number on the card as the first five, and why don't they fall in the first 5 percent?

Mr. Srinivasan: I'm not sure I understand.

Justice Breyer: All right.

Forget it.

[Laughter]

Mr. Srinivasan: Sorry.

Justice Ginsburg: Can you enlighten us a little bit about how this statute developed?

Mr. Srinivasan: Sure.

Justice Ginsburg: As far as I know it was the same Secretary of Education when the statute came on the books and when the regulation was kind of readopted, I think it was--

Mr. Srinivasan: I think that's right, Justice Ginsburg.

Justice Ginsburg: --But there was a peculiar proposal to drop, it was the Secretary's proposal to drop the bottom five.

So it was a different proposal, and what was the reason for that?

Why keep, keep the 95th percentile but not the 5th?

Mr. Srinivasan: Well, as we point out in a footnote in our brief there was some education finance experts that suggested there would be no reason to retain the exclusion at the bottom of the range, and I think that's because when you have low per-pupil revenues there is a reason not to exclude those figures.

But the important point is the material important part of the language, which is 95th percentile of such expenditures or revenues in the State, is exactly what the Secretary proposed and the Secretary of course wouldn't have curtailed his own discretion to continue the same methodology that he had long had in place.

Thank you.

Argument of Leigh Marc Manasevit

Chief Justice Roberts: Thank you, Counsel.

Mr. Manasevit.

Mr. Manasevit: Mr. Chief Justice, may it please the Court:

I'd like to begin with Justice Ginsburg's question, because I think that that is very illuminating to where we are today.

This statute began against a history, an 18-year history where the agency had been delegated by Congress virtually carte blanche authority to devise equalization tests.

That was the earlier statute.

The agency had three tests at the time.

One was the 25 percent disparity test that we see today and there were two other tests.

In 1994, what happened was the Secretary proposed to the Congress and the Congress following the Secretary's lead eliminated the two other tests.

That's, that's what was happening.

And Justice Scalia asked well, why would the Secretary tie his hands?

What happened was the Secretary no longer was satisfied or liked the other two tests and eliminated those and proposed the test that he had been using for 18 years to the Congress.

Congress adopted that test and that's the test that we have today, the 25 percent disparity test.

The difference is that whereas the Secretary had the free rein to develop that disparity test, however he wanted, previously, the Secretary... the Congress now told the Secretary in disparity, do the following things.

First of all 25 percent is the maximum disparity that we are going to allow you, number one.

And number two, take out the outliers in a range of 5 to--

Chief Justice Roberts: Isn't it... I'm sorry.

Go ahead.

Justice Scalia: You know, I really don't care what the Secretary thought he was doing.

I mean, it seems to me we have to ask the question, what would a member of Congress who voted on this thing have thought he was voting for, who had, you know, didn't have this history you're giving us.

And more importantly, what would a citizen to whom this language is promulgated think the language means?

I don't care what the Secretary had in the back of his mind.

Why should that make any difference to us?

Mr. Manasevit: --Fair question, Justice Scalia, and that brings us back to the language of the statute, where of course we begin, and we have to look precisely to the language of the statute.

The language of the statute, what Petitioners mistake is that the language of the statute here has a two-part process.

to the previous usage of that precise term, which is disregard local education agencies with per-pupil expenditures or revenues.

So it's that "with per-pupil revenues" that the "such" would refer back to, the most immediate prior reference, so we're still looking at per-pupil revenues or expenditures in the State which we have to rank first.

We don't identify LEAs first.

It doesn't say 95th percentile of LEAs.

It tells us rank per-pupil revenue.

The only difference--

Justice Souter: It says disregard LEAs; it then identifies certain LEAs which are to be disregarded.

Nowhere does it say disregard pupils.

Mr. Manasevit: --No.

It says... it says... we are disregarding the LEAs.

That's the end of the process.

But we have to identify the range of value that 5 percent and 95 percent applies to.

The range... the percentiles apply to a range of values.

We have in New Mexico, we have 89 amounts of per-pupil revenue per district, we have 89 of those.

But we also have 377,000 per-pupil revenues, because a per-pupil revenue repeats for every time that there's a student, and--

Chief Justice Roberts: No.

No.

See, that's my conceptual difficulty.

It is only per pupil when you're dealing with an aggregation of the pupils.

If you're going to break it down pupil by pupil, which is what you do, you don't have a per-pupil number associated with each pupil.

You have a number.

Nobody knows what it is because nobody knows how much you spend on each individual.

We know how much you give to this district, and therefore, the district has a per-pupil number, and therefore, I would have thought a reference to per-pupil numbers suggests you're grouping according to district.

Mr. Manasevit: --Mr. Chief Justice, we are not saying that it can't.

We're... all we're saying is that it equally carries both meanings.

School finance is an extraordinarily technical area, which is precisely why Congress left this issue to the agency to work this out.

When Congress... when Congress used the terms 5 percent and 10 percent, and again I'm not, I'm not reading Congress's mind to say that when Congress used those terms, those percentiles, Congress must have intended some national uniformity.

This is a national program and Congress expects these programs to be applied somewhat uniformly across... across the country.

Justice Scalia: Let me--

Rebuttal of Sri Srinivasan

Chief Justice Roberts: Go ahead.

Justice Scalia: --Let me ask you the same question I asked... I asked the Government.

Why don't you, if this is a natural reading, why don't you apply it to, to 2.A?

You don't even think of doing that in--

2.A.

In 2.A you just look at the individual agency, but it's the same language in 2.A.

Mr. Srinivasan: In 2.A, 2.A calls for a different type of comparison.

And I also note that in--

2.A it refers to percent instead of percentile, which refers to two numbers being compared.

Percentile refers to an entire ranking of value, so the processes are somewhat different.

Now we're not, I'm not contending that this statute is absolutely clear and a model of draftsmanship, but certainly the meaning of 95th percentile or 5th percentile of such expenditures or revenues is a broad enough term.

Justice Breyer: To include the words per-pupil revenue for each pupil, is that what you're saying?

Rebuttal of Leigh Marc Manasevit

Mr. Manasevit: Well, to--

Justice Breyer: How do you want to say it, per-pupil revenue attached to each pupil?

Mr. Manasevit: --Well, I believe--

Justice Breyer: Or how do you want to say it then?

Mr. Manasevit: --I believe simply that the word per-pupil revenue can mean the dollar amount per each agency 89 times, or it can mean repeated each time a student generates--

Justice Breyer: What is attached to each pupil?

You say the word such is broad enough to include per-pupil revenue as attached to each pupil?

Mr. Manasevit: --Yes.

Correct.

Remember--

Justice Breyer: And I don't know where to look to discover if you're right or wrong.

Mr. Manasevit: --Well, bear in mind... bear in mind the nature of many education--

Justice Breyer: Is there any statistical text that you could look at to see it that's the way people use the words?

Mr. Manasevit: --That answer I couldn't answer, but I can tell you that typically in an education statute, funding is distributed on the basis of numbers of pupils.

So if the statute says $3,000 per pupil shall go somewhere, the... the statute means you take that dollar amount and you--

Chief Justice Roberts: Well, that must not be right, because otherwise we wouldn't have any disparity to worry about equalization in the first place.

Right?

Mr. Manasevit: --Well, we always... we always will have disparity in the real world and that... and that's because lots of things cause disparity.

In this case actually, local tax revenues are not the cause of disparity because there are no significant local tax revenues at issue here.

But disparity happens... in the top three or four districts in New Mexico you have under 100 students, or slightly over 100 students.

In a district that small, minor things, an insurance recovery for example, a couple hundred thousand dollar insurance recovery in a district of 87 students will generate $3,000 of revenue per member for that year.

It's a distorting figure.

That's precisely what Congress is trying to get rid of.

But when Congress says 5 percent, presumably Congress intends that 5 percent to have some uniform applicability across the country and not vary with a State like New Mexico where it would just eliminate five districts.

Or in our... in our neighboring State of Maryland, Montgomery County has the highest per-pupil revenues in the State.

It has 16 percent of the population.

Under petitioners' view, that... and it has 24 districts, so that district would be eliminated under petitioners' view.

It would completely be eliminated.

Yet under our view, the 10 percent would fall within that and we would keep it in.

So--

Chief Justice Roberts: Don't you think Congress, if Congress is concerned about the, in this provision, about the impact of the Federal presence, and your reading prevents the money that Congress meant to go to those particular districts from actually reaching the districts, I mean, wouldn't we be inclined to read it the way that, let the money get where Congress meant it to go?

Mr. Manasevit: --Thank you, Mr. Chief Justice, because that was on the list of things that I wanted to cover, and I'm sure that petitioners 'counsel inadvertently misspoke.

Impact aid never ever gets diverted from the district.

Impact Aid goes from the Federal Government pursuant to a formula--

Chief Justice Roberts: Well, sure, but then the question is whether the State can consider it when they're figuring out how much money to give it.

So in effect it's diverted.

Mr. Manasevit: --Well, remember, the State figures a total cost of program for every district starting from zero, number of students and dollars needed to manage those number of students, and the State supplies that amount of money.

So where the district gets some of that necessary money from another source, the State under equalization is allowed to just consider that that amount of money, in addition to what the State is going to provide, will provide the entire amount.

Mr. VanAmberg: Mr. Chief Justice had a question as to whether or not the, an appendix is something different from a regulation or carries a different weight, and I haven't found anything determinative.

But I would refer the Court to Young versus Community Nutrition Institute where it identifies something similar to an appendix as an example, and the Court says an example is just that, an example.

And I don't think we need the argument to prevail, but we would submit that it is at best confusion, it's confusing that the Secretary would take the body of the methodology proposed by Congress, put it in his, in the body of his regulation, and then refer the public to an appendix in order to, how to work the methodology.

And in this appendix, he then flips what Congress intended and what he had in the body of his own regulation.

I would also suggest that Congress cannot be presumed even in this instance to not be, at least have some input as to what was happening.

In the Senate bill, my understanding is that there was a suggestion that the disparity figure would only be 10 percent and not 25 percent.

That didn't make it through but the statute as it was written, and I think lasted for about a year or so, had the disparity amount going from 25 percent to 20 percent.

That was subsequently amended and kept back up at the 25 percent level.

So the idea that this was not a bill where Congress paid attention, I think, is not a warranted assumption.

Justice Ginsburg: Mr. Van Amberg, could a State get to the same result?

Let's say your reading of the statute is the only permissible one.

By combining school districts, it's no longer going to be the X school district and the Y school district, it will be the XY school district, and then the population would increase.

Still only one LEA.

Mr. VanAmberg: There is a provision, Justice Ginsburg, in the Impact Aid Act, and I think it's 7113, in which it basically says that if the Secretary of the Education perceives that a State is manipulating its LEAs in a way in which to take advantage of the, of this limited exception, it can disregard that action.

So I think there is built... I think Congress was one step ahead of us and recognized that possibility and addressed it.

This one is called Zuni School District versus the Department of Education.

Now, there is a federal statute again and what this federal statute says is, it says that “if in fact there are a lot of costs that the federal government is making a local school district incur.”

For example maybe there is a lot of federal land nearby or maybe there is an army-base and they have to educate the children.

So, the federal government has made it harder for the local school district to raise money for its expenses or to pay money for the education.

Will Then the federal government will give them some money they will write them a check, say, it was for a million dollars.

Well, the federal government says in this statute now if we give you the million dollars to the School District for this, the state cannot just take the million away by reducing their own aid to the School District by a million; they can’t do that.

But, then someone worked out that suppose they have what’s called an equalization program in the state where they try to keep per-pupil expenditure about the same in all the school districts, suddenly, there’ll be a school district with an extra million dollars and that might make them the riches.

So, they should be able to offset in that situation and so they wrote the statute to say but, in that situation they can offset provided there is an equalization program.

Well, what’s an equalization program?

So, the statute sets up a method for measuring that and it says basically the method consists of list all the school districts in order of per-pupil expenditure, look at the top one, look at the bottom one and if it’s less than 25% difference in what they’re spending per-pupil then you’ve got an equalization program.

So far so good but then they add an instruction, the added instruction is to say when you make that list don’t put in the outliers, well, what’s an outlier?

An outlier and this is what’s called the disregard instruction, says that, when comparing the highest and lowest per-pupil expenditures the “secretary shall disregard school districts with per-pupil expenditures above the 95th percentile or below the 5th percentile of such expenditures.”

Now, we get to the question in the case.

When the Secretary of Education was administering this statute he would lineup all the school districts and then when you try to see what to disregard, he looked to the top 5% of pupils by number and pupils by bottom, that’s the top and the bottom.

Now, some school districts have worked out they’re going to get more money if they say, you shouldn’t have done that, what you’re supposed to do is disregard 5% of the school districts, not 5% of the pupils.

Well, which should it be?

The secretary says, I want to tell you two things, first, we’ve done it my way, pupils for 35 years now, I wrote this statute in draft and sent it to Congress and there are no exceptions and I have excellent reasons.

My reason of course is imagine that you had a school district, a state would say 20 school districts and suppose that of the 20.

For example, two of them accounted for half of the pupils in the state, the rest were rural, and suppose that two one was at the top and one was at the bottom, well, 5% of school districts, you’ll be disregarding half of the pupils, those who are not outliers.

So, I want to do it my way by pupils, it makes sense historically, it makes sense in terms of purpose but what about the language.

At this point, all of us I think, all nine of us worked out that that language is a little difficult.

So, we’ve gone into the language in depth in the opinion for those who are interested you can read about that language and five of us, a majority in the opinion I am announcing conclude that the language permits the Secretary’s interpretation.

Four of us conclude that it doesn’t and they dissent.

Well, by this greater than before so we favor the Secretary in our holding and we affirm the judgment of the Tenth Circuit.

Justice Stevens has written a concurring opinion.

Justice Kennedy has written a concurring opinion which Justice Alito has joined.

Justice Scalia has written a dissenting opinion in which the Chief Justice and Justice Thomas have joined and in which Justice Souter has joined as to Part I.